A big milestone was reached on Aug. 16, 2019, as the Georgia Department of Banking and Finance reached the century mark of its establishment through an Act of the Legislature. When we were preparing for GBA’s 125th anniversary in 2017, we took a deep dive through our archives and thought we’d reproduce reports about all the work that led up to the creation of the Department as we know it today. We appreciate the relationship we at the GBA have had with the Department over the years. Reading this first-person account of history in the making shows once again the important role bankers play by working with legislators to pass comprehensive legislation benefiting not just our industry but the state as a whole. Georgia is looked upon for our leadership, a great place to do business, and for having the best banking laws in the country. None of that came about by accident. It took years of hard work, consensus building and informed advocacy. And that’s just as important today as it’s ever been.
1908 – Thoughts of a Bank Bureau
From the Georgia Banker’s Code published in 1908 by GBA’s general counsel Orville A. Park, we learn a substantial revision to the laws of Georgia was enacted in 1895. Not being caught up by the clever naming we see in statutes today, the revision was simply entitled the Georgia Code of 1895. The statute was the best the General Assembly could do at the time, but their work left various banking provisions scattered throughout the code. It’s certainly understandable legislators would struggle as a major change in banking law had occurred with the adoption of a Constitutional Amendment in 1892, the year GBA was organized. Prior to that amendment, banks were incorporated under special acts of the Legislature. The powers of these banks, as well as their liabilities were fixed in their charters and differed greatly among themselves. To determine the powers of any particular bank, the act of the Legislature incorporating the institution had to be reviewed. Moving those powers, duties, obligations and liabilities of banks to the general code was perhaps one of the most significant changes in banking law ever seen in our state. At the time there was a State Bank Examiner. His duties overseeing the banks were so intertwined with the duties of the state Treasurer overseeing the state’s financial resources that the two positions were held by the same person. Additional changes to the banking laws were made in subsequent sessions of the General Assembly and bankers concluded the whole banking code was in serious need of refinement. An attempt was made through the Act of 1907 to do just that. It was in this legislation where we find the first mention of the creation of a separate state Bank Bureau. But the legislation was far from perfect and efforts to correct it the following session stalled. We learned later, the holdup creating a separate banking department was more about funding the Treasurer’s office than it was about enacting a modernized code and a separate department to oversee the banks. Bankers were clearly frustrated with the lack of action, so our General Counsel at the time published the first comprehensive summary of statutes, opinions and various reports required of all banks. While admittedly not exhaustive, it was a resource on the desk of every bank president. Anyone reading through the Georgia Banker’s Code could readily discern the banking laws were in a state of disarray and the compilation proved valuable to future legislatures as they sought to perfect the banking laws making them more useful to all. Here’s the preface from that book giving more details.
Origin of Bank Call Reports
A side note, if you’ve ever wondered where FDIC got the idea of quarterly Call Reports, you need to look no further than state laws. In Georgia, banks were required to file Call Reports at least quarterly and within 10 days upon the call of by the State Bank Examiner. Here’s the standard notice sent to banks at the time.
1917 – Treasurer and State Bank Examiner May Get a Divorce
For the next several years, things were quiet. At the 1917 annual GBA convention held in Columbus May 2-4, General Counsel Park said progress had been made with the Treasurer finally agreeing to “divorcing the banking department from the Treasury,” and legislation had been drawn to do that. Yet, frustration was evident in his report as the legislation didn’t pass. Apparently it was all about the money as the banks were paying for the operation of the combined Treasury Department and State Bank Examiner and no revenue source was evident to legislators to pay for the Treasurer as a standalone entity. Read Park's full report here.
1918 – Public/Private Committee Created by Legislature
GBA’s Legislative Committee made a report at the annual convention held in Atlanta May 27-29, 1918. It reported hopes for a quiet legislative session were quickly dashed as legislators introduced bills ranging from essentially curtailing the usefulness of banks to substantially raising taxes. The report mentions that the creation of a standalone Banking Department was a goal, but had to take a back seat to fighting those bad bills and they succeeded in doing so. A helpful resolution was passed with the Speaker of the House appointing three legislators and two GBA members to a study committee to frame a bill for the 1919 legislative session to finally separate the Banking Department from the Treasury. Here’s the report, which sounds like some of the reports GBA is still making about spending a lot of time working to defeat bad legislation.
A photo of the 1918 Banking Department examiners and staff, courtesy of the Banking Department'from its archives.
1919 – Constitutional Amendment Paves the Way
General Counsel Park’s report was read into the GBA annual convention proceedings at their meeting held on Tybee Island, May 27-29, 1919. Bankers applauded the good news. Park had drafted a constitutional amendment to increase the salary of the State Treasurer and provide proper provision for the operation of the office. The General Assembly passed the authorizing legislation and the voters ratified the Amendment. The time was right for a total revision of the banking laws and the creation of a separate Banking Department. Park drafted the bill and explained his draft at each of GBA’s five Group Meetings and to the annual meeting of the Country Bankers Association. The consensus was to move forward at the upcoming legislative session.
Chain Banks and the Country Bankers Association
Side note: If you’re not familiar with the Country Bankers Association, the organization had sprung up to mostly represent a string of 134 Georgia banks that had either been bought or started by W.S. “Uncle Billy” Witham beginning in 1888. Witham sold out to W.D. Manley in 1915 and things went well for a time. Busted Florida land speculation and shady insider dealings led to bankruptcy, the collapse almost overnight of 124 banks in the chain and jail time for Manley. The remaining few banks approached GBA about merging their association into the GBA, which was accomplished in short order. Two of those banks are still in operation and are GBA members today.
But back to Park’s report. In addition to mentioning the success of the Constitutional Amendment, he reports on taxation, an issue that’s never far from the sight of bankers throughout our history. We’ve been asked to help every time the legislature looks at changing Georgia’s tax laws, especially as they apply to banks and banking. Here’s what Park told the conventioneers on Tybee Island.
1920 – Mission Accomplished; Georgia’s First Banking Superintendent Appointed
GBA members met for their annual convention in Athens June 9-11, 1920. There they heard a report from General Counsel Park, that the legislature had enacted a new banking law and the separate Department of Banking had gone into active operation. T.R. Bennett had been named as the first Superintendent fulfilling “our hopes and efforts for the past dozen years.” Park was rightfully proud of the statute when he boasted it was the most comprehensive banking law ever enacted in any state. Here’s his report.
2019 – An Ongoing Relationship with Aligned Goals
GBA president and CEO Joe Brannen had this to say about the history: “Bankers made the decision to create a state Banking Department to oversee the industry; it wasn’t decided for them. Bankers were willing to spend political resources fighting for what they knew was the right thing. In exchange for agreeing to submit to exams and complying with all the rules regulating the industry, bankers knew they would get in return a safer and sounder banking system that would build confidence and trust from the public, their shareholders and employees. A lot has changed over the years, but two things have remained constant: the willingness of bankers to step up and lead every effort to move the industry forward and ensuring a regulatory system is in place that protects the public they are chartered to serve. There’s a necessary distance between the examiner and the banker, yet their goals for a safe and sound industry are exactly aligned. In my 39 years here at the association, I’ve had the pleasure of working with five Commissioners appointed by the Governor: Jack Dunn, Steve Bridges, David Sorrell, Rob Braswell and Kevin Hagler. Each came to the position with their own level of experience, knowledge and abilities. Yet each focused on the big picture of a safe and sound industry and a respectful relationship with the industry they were charged with overseeing. We’ve worked closely together over the years to ensure the Georgia Banking Code is appropriate for an evolving industry and the rules are reasonable. We can boast today as confidently as our General Counsel did in 1920 that our banking code is the best in the country. Georgia is not only the best state in which to do business; we are also the best state in which to do banking. And that’s in large measure due to the history of bankers, policymakers and regulators working together toward a common goal of ensuring a prosperous future for all by promoting the general welfare and usefulness of banking and the preservation of a sound banking system.”